TT Talk - CISADA

Unlike OFAC, which is primarily directed at US persons, CISADA principally focuses on foreign persons engaging in certain types of transactions with Iran by subjecting the persons to sanctions which could limit, or eliminate, their ability to do business with, or in, the United States. These sanctions can include a prohibition on banking or foreign exchange transactions, a freeze (blocking) on US property in which the sanctioned person has an interest, denial of US export licences and export-import bank financing and a bar on imports.

Activities sanctionable under CISADA include knowingly:

  • making substantial investments in Iran's energy sector
  • providing Iran with goods, services, technology, information or support above a defined threshold amount that could facilitate production or importation of refined petroleum products (RPP)
  • insuring, financing or brokering the provision of items mentioned in the preceding two bullets
  • providing ships or shipping services to deliver RPP to Iran
  • providing Iran with goods, services, technology or other items which would contribute materially to

Iran's ability to acquire or develop WMD or destabilising advanced conventional weapons. "Knowingly" is defined to include both actual knowledge and "should have known". There is a defence of due diligence which depends mainly on procedures and controls. Under CISADA, sanctions can be imposed on the parent of a company engaging in the sanctionable activity (to the extent the parent knew or should have known of it) and on its subsidiaries and affiliates (to the extent the subsidiary/affiliate engaged in it). The Club is therefore at risk under CISADA to the extent it, or any branch, subsidiary, or affiliate, engages in sanctionable activity.

In addition CISADA provides that:

  • Persons seeking to contract with the United States must certify that neither they, nor any company owned or controlled by them engage in sanctionable activities
  • The US correspondent accounts of foreign financial institutions engaging in transactions with the
    Iranian Revolutionary Guard Corps or blocked Iranian banks may be terminated or restricted.

As one of the senators behind CISADA put it, financial institutions have the choice of dealing with the US or with Iran.

CISADA generally applies to activities commenced on or after 1 July 2010. Thus, insurance policies renewed or entered into on or after that date are subject to its provisions.